Catastrophe Theory in Macroeconomics
The Great Depression stimulated a major outbreak of theorizing with respect to the origins of macroeconomic fluctuations. Of course the dominant work of this period was Keynes’ (1936) The General Theory of Employment, Interest and Money which inspired the view that such business cycles could be eliminated by the appropriate application of aggregate demand management policies.1 Both bitter historical experience, as well as a variety of theoretical critiques, have since seriously weakened this view. Whether these cycles are exogenous or endogenous, regular or irregular, rational or irrational, or whatever, few are now so sanguine regarding our ability to utterly eliminate them.2
KeywordsBusiness Cycle Capital Stock Phillips Curve Catastrophe Theory Inflationary Expectation
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